(Bloomberg) — Stocks and U.S. futures drifted ahead of a key Federal Reserve meeting at which officials will deliver their outlook amid a budding economic recovery that risks stoking inflation. Treasury yields held near the highest levels in over a year.
The Stoxx Europe 600 Index opened little changed, with gains in automakers offsetting declines in travel and leisure shares. Futures on the S&P 500 fluctuated a day after the gauge snapped a record run. In Asia, South Korean shares retreated as Samsung Electronics Co. warned it’s grappling with the fallout from a “serious imbalance” in semiconductors globally.
The Treasury 10-year yield held around 1.63% heading into day two of the Fed’s meeting, after a 20-year bond auction drew strong demand. Market-implied inflation expectations are at 12-year highs. The dollar was stronger versus most major peers.
The Fed’s policy and outlook updates due Wednesday are center stage as the global recovery gains traction. Rates markets are positioned for the central bank to raise borrowing costs sooner than current guidance suggests. Higher inflation expectations have boosted bond yields and sparked a rotation from growth to value stocks. Bond investor Bill Gross predicted in a Bloomberg TV interview that inflation will rise to 3% to 4% in the coming months.
“The concern is the assets that have worked best over the last decade — rates, credit of all kinds and long-duration equities — may not be the only games in town any more,” said David Wong, investment strategist at AllianceBernstein.
Elsewhere, WTI crude oil edged up to trade around $65 a barrel. Bitcoin held at about $56,000, below the weekend record above $61,000.
These are some key events this week:
Fed Chair Jerome Powell will likely reaffirm his steady policy stance at the Fed policy meeting Wednesday.Bank of England rate decision Thursday. BOE is expected to leave monetary policy unchanged.Bank of Japan monetary policy decision and Governor Haruhiko Kuroda briefing Friday.
These are the main moves in markets:
Stocks
Futures on the S&P 500 Index were little changed at 8:12 a.m. London time.The Stoxx Europe 600 Index was little changed.The MSCI Asia Pacific Index fell 0.2%.The MSCI Emerging Market Index fell 0.4%.
Currencies
The Bloomberg Dollar Spot Index gained 0.1%.The euro dipped 0.1% to $1.189.The British pound jumped 0.2% to $1.3919.The onshore yuan strengthened 0.1% to 6.502 per dollar.The Japanese yen weakened 0.1% to 109.16 per dollar.
Bonds
The yield on 10-year Treasuries jumped one basis point to 1.63%.The yield on two-year Treasuries climbed less than one basis point to 0.15%.Germany’s 10-year yield increased less than one basis point to -0.33%.Britain’s 10-year yield jumped two basis points to 0.802%.Japan’s 10-year yield declined less than one basis point to 0.1%.
Commodities
West Texas Intermediate crude advanced 0.6% to $65.17 a barrel.Brent crude increased 0.4% to $68.69 a barrel.Gold strengthened 0.2% to $1,735.19 an ounce.
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